Fixed Price

A fixed price is a price agreed at the outset of a transaction that does not change with subsequent market movements. In energy markets, fixed-price structures are commonly used in physical supply contracts, swaps, and hedging programmes to provide certainty over revenues or costs. Producers may fix prices to stabilise cash flow and support investment planning, while consumers such as airlines or utilities may fix prices to manage budgeting and margin risk. By fixing the price, one party transfers market price risk to the counterparty, typically a trading firm or financial institution. While fixed pricing reduces exposure to adverse price moves, it also removes the opportunity to benefit from favourable market movements. As a result, fixed-price agreements are often combined with options or collars to balance risk and flexibility. Fixed pricing plays a fundamental role in risk management across the energy value chain, particularly in volatile markets.